Next sales rise helped by online expansion

Next Plc has raised its full-year revenue and earnings forecasts as the UK’s second-biggest clothing retailer reported first-half sales that beat analysts’ estimates, helped by its push into e-commerce.

Revenue rose 11% in the 26 weeks to July 26.

Next has expanded its online business into 70 countries outside the UK, giving it a low-cost way to compete with Spain’s Inditex and Sweden’s Hennes & Mauritz (H&M) in markets where it doesn’t have stores. That has also helped Next surpass main UK competitor Marks & Spencer Group Plc in earnings and market value.

First-half sales at Next’s stores were up 7.5& while revenue for its home-shopping Directory business gained 16%.

The trading update “highlights the strong form the business finds itself in,” wrote Alistair Davies, an analyst at Investec. “Directory sales growth remains stellar.”

Next said full-year pretax profit will be £775m to £815m, compared with an earlier forecast of £750m to £790m. The company raised sales and profit forecasts in April.

“This is another strong set of results from Next as they continue to positively surprise on both top-line growth and profit,” Jamie Merriman, an analyst at Sanford C Bernstein, said in a note.

Next started a website called Label this year, offering designer clothes under brands including Diesel, Emporio Armani and Jimmy Choo.

Next Directory, introduced in 1988, has grown to become Britain’s biggest home-shopping business. Next also has more than 500 stores in the UK and Ireland.

The first half a year ago was damped by cold weather. The final quarter this year may present a “challenging comparison,” leading Next to expect full year sales to slow down from the first-half pace, a forecast that may appear “overly cautious” the retailer said.

Next is investing in store expansion, which it says boosts online sales. Revenue from new space contributed 2.4% to the growth in the first half of the year.